SUNScholar - Browsing by Author "Hamman, W. D."

Browsing by Author "Hamman, W. D."

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Assessing company strength in South Africa using value added : 1990-2000
(AOSIS, 2004) King, C.; Hamman, W. D.
This article aims to determine if value added-based ratio analysis could be used to measure organisation strength and be useful as a tool in corporate strategy formulation. The areas of investigation included productivity of production factors, reinvestment in capital and overall business control. Productivity measurement provides insight into the capital and labour intensity of organisations. Some organisations were able to exert high value added to sales ratios, but they did not perform as well when their productivity levels were measured. Reinvestment in capital tries to establish if organisations have the means to uphold and strengthen their present asset base, which also includes its human capital. Margins on sales and value added are used to measure overall business control and provide insight into the ability of organisations to add value through their own production skills or by command of lucrative contracts with suppliers. Organisations that are able to show high values on both ratios are said to display a high degree of overall business control. The formulas used in this article are a replication of those used by the mentioned authors. The models as developed by Bryant are specifically used to see how they fit in the South African context and to draw conclusions about their use for future purposes.
Cash flow reporting : do listed companies comply with AC 118
(University of Pretoria, 2003) Steyn, B. W.; Hamman, W. D.
This article assesses the state of cash flow reporting by listed South African industrial companies in order to evaluate whether the users of financial statements can accept them as being reliable and use them as a tool to compare the operating performance of various companies. As the cash flow statement has been in use since 1989, it was envisaged that compliance would be high. However, it was found that there are several companies that deviate from some of the requirements of AC 118 regarding cash flow statements.
The danger of high growth combined with a large non-cash working capital base - a descriptive analysis
(AOSIS, 2002) Steyn, B. W.; Hamman, W. D.; Smit, E. v d M.
A high growth rate may not be the ultimate measure of a successful company. This article shows that growth at too high a rate, for a company with a high non-cash working capital component, may lead to financial difficulties. While the income statement of a company is based on the accrual of income and expenses, the cash flow statement is based on the receipt and payment of cash. A company experiencing high sales growth, depending on the extent of its non-cash working capital, will find that the cash flow from operating activities before the payment of dividends will not grow as quickly as the net profit after taxation. This is because the accrual part included in the net profit after taxation is also growing at a high rate. At such a growth rate, operating activities do not generate sufficient cash to sustain the day-to-day activities of the company.
Measuring cash flow flexibility of companies : the cumulative index-difference
(AOSIS, 2002) Steyn, B. W.; Hamman, W. D.; Smit, E. v d M.
Cash is king. Even a highly profitable company can find itself in search of financing due to a lack of cash to honour its obligations. If this situation is only temporary and external sources of finance are freely available, this cash flow obstacle does not have to be detrimental to the stakeholders of the company. However, if the poor cash position of a company is not temporary, but rather an integral part of its structure and a result of its strategy, stakeholder interest may be at risk. Although insolvency is seldom the outcome, such companies find themselves struggling because of their cash flow inflexibility. The cumulative index-difference aims to identify companies that are cash flow inflexible, in order to enable stakeholders to take timely measures to prevent a negative outcome. With adjustments in strategy and preventative measures taken, the cash flow positions can be improved to prevent a disaster.
Predicting financial distress of companies listed on the JSE : a comparison of techniques
(AOSIS, 2009) Muller, G. H.; Steyn-Bruwer, B. W.; Hamman, W. D.
In 2006, Steyn-Bruwer and Hamman highlighted several deficiencies in previous research which investigated the prediction of corporate failure (or financial distress) of companies. In their research, Steyn-Bruwer and Hamman made use of the population of companies for the period under review and not only a sample of bankrupt versus successful companies. Here the sample of bankrupt versus successful companies is considered as two extremes on the continuum of financial condition, while the population is considered as the entire continuum of financial condition. The main objective of this research, which was based on the above-mentioned authors' work, was to test whether some modelling techniques would in fact provide better prediction accuracies than other modelling techniques. The different modelling techniques considered were: Multiple discriminant analysis (MDA), Recursive partitioning (RP), Logit analysis (LA) and Neural networks (NN). From the literature survey it was evident that existing literature did not readily consider the number of Type I and Type II errors made. As such, this study introduces a novel concept (not seen in other research) called the "Normalised Cost of Failure" (NCF) which takes cognisance of the fact that a Type I error typically costs 20 to 38 times that of a Type II error. In terms of the main research objective, the results show that different analysis techniques definitely produce different predictive accuracies. Here, the MDA and RP techniques correctly predict the most "failed" companies, and consequently have the lowest NCF; while the LA and NN techniques provide the best overall predictive accuracy.
The repurchase by a holding company of treasury shares held by subsisiaries : a South African perspective
(AOSIS, 2012) Wesson, N.; Hamman, W. D.
This study aims to establish whether the repurchasing of treasury shares by a holding company is a regular occurrence for companies listed on the Johannesburg Stock Exchange (JSE); whether these repurchasing companies have complied with the relevant legal and reporting requirements; and what their stated motivations were for these repurchases. In a sample of 251 companies listed on the JSE from 1999 till their 2009 financial year-end, 120 (47,8%) companies executed share repurchases. Thirty-six (30%) of the 120 companies repurchased treasury shares from their subsidiaries in 55 different transactions, representing 22% of the total number of shares repurchased. Companies which repurchase treasury shares do not always comply with the legal requirements (such as obligatory Security News Agency (SENS) announcements and circulars); and the accounting requirements of International Financial Reporting Standards (IFRS) (relevant to the disclosure of the reconciliation of the number of shares in issue) are applied in an inconsistent manner in annual reports. The most common reason for the repurchase of treasury shares was that the 10% limit (on treasury shares held by subsidiaries) had nearly been reached. Various business purposes were also given. Income tax implications did not seem to be a conclusive motivation for repurchasing treasury shares. The repurchase of treasury shares by the holding company is not allowed in most other countries, like the UK, and presents unique challenges to the South African share repurchase environment. More stringent application of the JSE Listing Requirements, as well as better guidance on the IFRS disclosure requirement on the reconciliation of the number of shares in issue, is needed in South Africa. This will enable stakeholders to make better-informed decisions and will also assist research on share repurchases. This material is based upon work supported financially by the National Research Foundation. However, any opinions, findings, conclusions and recommendations expressed in this article are those of the authors alone, and the NRF does not accept any liability in regard thereto.
Share buy-backs for a selection of JSE listed companies : an exploratory study
(AOSIS, 2010) Bester, P. G.; Wesson, N.; Hamman, W. D.
This study undertook to derive share repurchase trends from a small sample of JSE-listed companies over the nine years, 1999-2008. The study also draws attention to the particular obstacles to be overcome when conducting research into the unique South African share repurchases environment. The study finds that 33 companies made 71 repurchase announcements (47 general and 24 specific) via the Securities Exchange News Service (SENS) over the period July 1999 until financial year-end in 2008. On average, 59,0% of the total number of shares (and 49,3% of the total value) repurchased under a general authority is not included in the 3% SENS announcements. General share repurchases represent 47,9% of total repurchases in volume (and 60,5% in terms of value). The total number of shares repurchased (excluding share trust purchases) by the 33 companies shows that 56,8% were repurchased by subsidiaries and 17,1% were subsequent repurchases by companies from subsidiaries. (In value, these repurchases represent 53,7% and 17,2%, respectively.) This study therefore concludes that research based on only the 3% SENS announcements of general share buy-backs results in significant understating of actual total share buy-back activities, and that the South African share repurchase environment presents unique challenges. The main obstacle for future South African research in this field however is the lack of comprehensive and accurate share repurchase data as supplied by South African financial data sources. This material is based upon work supported financially by the National Research Foundation. Any opinion, findings and conclusions or recommendations expressed in this material are those of the authors and therefore the NRF does not accept any liability in regard thereto.
Share repurchase and dividend payout behaviour : the South African experience
(AOSIS, 2015-09-30) Wesson, N.; Bruwer, B. W.; Hamman, W. D.
Share repurchases, rather than dividend payments, are increasingly becoming the globally favoured payout method. This has prompted a renewed interest in the field, and raises questions about the actual motivation for share repurchases and whether companies are now repurchasing shares in preference to investing in future growth. This study set out to ascertain whether South African company payout behaviour mirrors global company behaviour. Comprehensive data on share repurchases are, however, not compiled by South African financial data sources or by the Johannesburg Stock Exchange Ltd. In preparation for this study, the authors thus compiled the first comprehensive share repurchase database for companies in selected JSE-listed sectors for the first 11 years (i.e. 1999 to 2009) since share repurchases were first allowed in this country. Share repurchases were found to be a popular payout method, especially in the more recent periods covered in the study. Payout value was dominated by a few companies paying dividends every year and regularly repurchasing shares. Aspects unique to the South African regulatory environment, however, resulted in the South African share repurchase experience not fully mirroring current global practice. The main constraint in the South African share repurchase environment is that comprehensive, actual-time-based share repurchase data are not available. Recommendations are made on how to align the South African regulatory environment with global best practice. Regulatory changes, as well as continued research in the field, will equip stakeholders to make informed decisions.
Share repurchases : which number of shares should be used by JSE-listed companies when publishing market capitalisation in annual reports?
(AOSIS, 2008) Bester, P. G.; Hamman, W. D.; Brummer, L. M.; Wesson, N.; Steyn-Bruwer, B. W.
The legalisation of share repurchases in South Africa since July 1999 introduced additional complexity to financial reporting. The repurchasing of shares by subsidiaries or share trusts has led to a new concept: the number of company shares differs from the number of group shares. Ratios like earnings per share and headline earnings per share are governed by accounting standards and circulars, and prescribe the use of the (weighted) number of group shares. No guidance exists on the calculation of market capitalisation. This article aims to determine the methods used by companies listed on the JSE Securities Exchange South Africa (JSE) to calculate their number of shares when publishing market capitalisation. It was found that only about 25% of companies participating in share repurchases and publishing market capitalisation in their annual reports calculated market capitalisation based on the number of group shares. About 75% of the companies did not calculate their market capitalisation based on the number of group shares (i.e. they omitted to deduct subsidiary repurchases and/or trust consolidations in their calculation of the number of shares). It was also found that the JSE, when compiling the Top 40 index, calculates market capitalisation based on the number of company shares (i.e. ignoring subsidiary repurchases and trust consolidations). Accounting guidance is needed on the reporting of market capitalisation to ensure that this aspect is not overstated by the reporting entities.
What is the best way to predict financial distress of companies
(Stellenbosch : Stellenbosch University, University of Stellenbosch Business School, 2012-12) Muller, G. H.; Steyn-Bruwer, B. W.; Hamman, W. D.
ENGLISH ABSTRACT: Predicting distress is essential for investors or lending institutions who wish to protect their financial investments. Which predictive techniques work best?

Browsing by Author "Hamman, W. D."

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